Money Demand in the United States

International Monetary Fund

No 1988/086, IMF Working Papers from International Monetary Fund

Abstract: This paper considers the demand for various monetary aggregates with a view to assessing their potential roles as intermediate variables for monetary policy. Illustrative estimates using a generalized autoregressive distributed lag model are presented. For M1, the results support an “error correction” model. However, the demand function for M1 may still be subject to shifts due to the continuing process of financial reform and innovation. The demand function for M1A resulting from the particular empirical strategy used in this paper is not well behaved. The estimated equation for M2 is well behaved and robust, though the use of M2 as an intermediate target variable is questionable due to an inability accurately to control it.

Keywords: WP; money demand; real GNP; rate of return; velocity model; demand relationship; demand equation; demand estimation; Monetary aggregates; Demand for money; Inflation; Demand elasticity; Monetary base (search for similar items in EconPapers)
Pages: 44
Date: 1988-01-01
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Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:1988/086

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